Buyers to focus on smaller homes

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25 Feb 2013

Statistics South Africa (Stats SA) reveals that the value of recorded building plans passed (at current prices) increased by 9.2 percent (R6 144 8 million) in 2012.

The majority of home buyers in the South African market will largely remain in the segments for smaller-sized houses and higher-density flats and townhouses.

The biggest increase was reported for residential buildings (12.7 percent or R3 720 4 million), followed by non-residential buildings (8.2 percent or R1 317 3 million) and additions and alterations (5.2 percent or R1 107 1 million).

According to Stats SA, the increase in the value of building plans passed was dominated by Gauteng (contributing 7.0 percentage points or R4 632 9 million) and Western Cape (contributing 3.2 percentage points or R2 159 0 million).

A decrease was reported for KwaZulu-Natal (contributing -2.7 percentage points or -R1 804 5 million).

Stats SA says the real value of recorded building plans passed (at constant 2010 prices) increased year-on-year (y/y) by 3.2 percent (R2 034 5 million) in 2012 and the biggest increase was reported for residential buildings (6.5 percent or R1 814 3 million), followed by non-residential buildings (2.1 percent or R326.6 million).

However, a decrease was reported for additions and alterations (-0.5 percent or -R106.3 million).

Meanwhile, the seasonally adjusted real value of recorded building plans passed increased by 7.1 percent in Q4 compared with Q34 2012 and the biggest increase was reported for non-residential buildings (19.4 percent), followed by residential buildings (10.1 percent).

Additions and alterations decreased by 6.1 percent during the above-mentioned period.

According to the report, the value of buildings reported as completed (at current prices) increased by 4.6 percent (R1 961.1 million) in 2012 and increases were reported for non-residential buildings (15.6 percent or R1 573 5 million) and residential buildings (7.8 percent or R1 675 4 million), while a decrease was reported for additions and alterations (-11.2 percent or -R1 287 9 million).

The y/y increase was dominated by Gauteng (contributing 4.9 percentage points or R2 084 2 million) and large decrease was reported in KwaZulu-Natal (contributing -2.7 percentage points or -R1 162 3 million).

Stats SA says the real value of recorded building plans passed (at constant 2010 prices) increased year-on-year (y/y) by 3.2 percent (R2 034 5 million) in 2012 and the biggest increase was reported for residential buildings (6.5 percent or R1 814 3 million), followed by non-residential buildings (2.1 percent or R326.6 million).

The real value of buildings reported as completed (at constant 2010 prices) decreased y/y by 0.7 percent (-R280.0 million) in 2012 and a large decrease was reported for additions and alterations (-15.6 percent or -R1 794 8 million), while increases were reported for non-residential buildings (11.1 percent or R1 136 9 million) and residential buildings (1.8 percent or R377.9 million) during the above-mentioned period.

Stats SA says the seasonally adjusted real value of buildings reported as completed decreased by 12.5 percent during Q4 compared with Q3 2012 and the biggest decrease was reported for non-residential buildings (-30.3 percent), followed by residential buildings (-5.8 percent) and additions and alterations (-1.6 percent).

According to Absa Home Loans, building activity in the South African market for new housing remained subdued in 2012 compared with the period of 2005 to 2008.

Jacques du Toit, property analyst at Absa Home Loans, says the number of new housing units for which building plans were approved was down by almost 6 percent in 2012, mainly as a result of a contraction of more than 21 percent in the planning phase of houses smaller than 80 square metres.  

He says this category and larger homes as well as flats and townhouses showed improvement in terms of plans approved, but the growth in these segments remained in single digits.

Du Toit points out that the real value of plans approved for new residential buildings amounted to R15.52 billion in 2012, up by only R326.58 million or 2.1 percent from R15.19 billion in 2011.

In the period of 1994 to 2012, plans were approved for a total of 1 457 847 new private sector financed housing units, of which 1 020 713 units or 70 percent were in the segments of smaller-sized houses and higher-density flats and townhouses.

The construction phase of new housing recorded an increase of just more than 6 percent in the level of activity in 2012 compared with 2011, which is a lagged effect of an improvement in the planning phase in 2011.

These numbers exclude government-financed and government-subsidised housing, he says.

“The construction phase of new housing recorded an increase of just more than 6 percent in the level of activity in 2012 compared with 2011, which is a lagged effect of an improvement in the planning phase in 2011.”

He points out that the growth in construction volumes last year was mainly the result of an increase of 20 percent in the number of flats and townhouse units completed, which came on the back of 20 percent growth in the level of plans approved for these types of housing in the previous year.

Absa reveals that the real value of new residential buildings completed was up by R1.14 billion (11.1 percent) to a level of R11.40 billion in 2012 from R10.26 billion in 2011.

From 1994 to 2012, a total number of 1 084 381 private sector-financed new housing units were built, of which 73.4 percent or 795 273 units were houses measuring less than 80 square metres and flats and townhouses.

“Residential building activity will in 2013 continue to be affected by economic trends, household finances, property investment sentiment with regard to buy-to-let properties, and consumer confidence in general,” he says.

Du Toit points out that these factors, together with trends in building costs and lifestyle are expected to be reflected in the future demand for and supply of new housing, which will also be affected by activity in the secondary property market.

Housing affordability will remain an important factor in view of households’ financial position, property prices, transaction costs and property running costs, he notes.

As a result, it is expected that the focus of the majority of home buyers in the South African market will largely remain on the segments for smaller-sized houses and higher-density flats and townhouses, as reflected by the above-mentioned trends in residential building activity since the mid-1990s, he adds. – Denise Mhlanga

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